Ethiopia construction boom lays foundation for growth

Addis Ababa’s strategy of pouring funds into infrastructure is geared toward attaining middle-income status in 11 years, but experts say betting too heavily on construction may cause the plan to backfire

By Jenny Vaughan / AFP, ADDIS ABABA

Imports outweigh exports by a factor of four, according to IMF data, which starves the country of foreign exchange.

The ambitious state-funded infrastructure projects also threaten to strain public finances. IMF forecasts see the public deficit possibly swelling to 44 percent of GDP within several years, nearly double the current level that means the country is borrowing one-fifth of what it spends.

As it is, the financing shortfall for public works projects is already 10 percent of GDP, but for now, Berhanu said he is grateful for the government’s focus on the construction sector, since his business is booming.

“From a business perspective we are busy, sometimes it is even beyond our capacity,” he said, adding that his company has grown from three people to more than 300 over the past 20 years.

Berhanu said Ethiopia’s economic growth is fueling the expansion of his business by creating a demand for new infrastructure and that he in turn, is contributing to this by creating employment and supporting local industries.

“I hire a lot of workers here, I use a lot of local materials, I use a lot of subcontractors and because of that all we grow together and the country benefits,” he said.

Zemedeneh is confident the city will continue to attract foreign investors and that he expects its transformation to continue.

“The bottom line is you will not recognize Addis if you come 10 years from now, it will be a completely, completely different city,” he said.